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PETITIONER: M/s.  ALOPI PARSHAD & SONS, LTD.

       Vs.

RESPONDENT: THE UNION OF INDIA

DATE OF JUDGMENT: 20/01/1960

BENCH: SHAH, J.C. BENCH: SHAH, J.C. DAS, S.K. WANCHOO, K.N.

CITATION:  1960 AIR  588            1960 SCR  (2) 793  CITATOR INFO :  R          1963 SC1685  (14)  RF         1968 SC 522  (10)  R          1971 SC 712  (13)  R          1984 SC1072  (21)  RF         1988 SC 734  (17)  E          1988 SC1166  (5)  R          1989 SC 890  (18,30)  RF         1990 SC1340  (9)  R          1992 SC 232  (29)

ACT: Arbitration-Award, setting aside of-Error on the face of the record-Reference  of  specific  questions-Contract-Terms  of Payment    specified-Change   of   circumstances-Power    of arbitrator  to  vary  terms-Quantum  Meruit  Payment,   when justified.

HEADNOTE: The appellants were appointed under an agreement in  writing by  the  Governor-General  as  agents  for  purchasing   and supplying  ghee required for the Army personnel with  effect from  October 1, 1937.  After the outbreak of the World  War 11  there was an enormous increase in the demand of ghee  by the  Government  and  the agreement was  revised  by  mutual consent on June 20, 1942, and the original rates of  payment were scaled down.  On December 6, 1943, the appellants  made a  representation to the Government for enhancing the  rates as conditions had become 794 abnormal.  According to the appellants they were given assu- rances that their, claims would be favourably considered  by the   Government  and  relying  on  these  assurances   they continued  to                    supply   ghee in quantities demanded   by   the  Government   incurring    heavy   extra expenditure.    The   Government   did   not   enhance   the rates  and the matter was referred to arbitration under  the agreement  of 1937.  Before the arbitrators  the  appellants contended  that the agreement Of 1942 was not  binding  upon them  and claimed payment on the basis of the  agreement  Of 1937; and in the alternative claimed payment on the basis of increased   rates  of  mandi  charges,   additional   buying

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remuneration  and  contingency charges.  These  claims  were resisted  by  the  Government and it  was  denied  that  any assurances  were  given  by the Government  to  enhance  the rates.   The arbitrators incorporated the points of  contest in  the form of issues.  By an award dated May 2, 1954,  the arbitrators  rejected  the primary claim  of  the  appellant holding  that  the agreement of 1942 was  binding.   On  the alternative  claim  they  awarded a sum of  money  for  loss suffered  by the appellants on account of establishment  and contingencies,  and  another  sum for  mandi  and  financing charges.   The  award  was  filled  in  the  Court  of   the Commercial  Sub-judge, Delhi, and the Government applied  to have it set aside.  The Sub-judge held that though there was an error on the face of the award in ordering the payment of additional  remuneration and financing and overhead  charges the award could not set aside as specific questions had been expressly  referred for adjudication to the arbitrators  and the  award was binding on the parties.  On appeal  the  High Court  held  that  no specific questions  of  law  had  been referred to the arbitrators and that the award was  vitiated by errors apparent on the face of the award. Held,  that the award was liable to be set aside because  of an error apparent on the face of the award.  An  arbitration award  may  be set aside on tile ground of an error  on  the face  of it when the reasons given for the decision,  either in  the award or in any document incorporated with  it,  are based  upon  a legal proposition which  is  erroneous.   But where  a  specific question is referred, the  award  is  not liable  to  be set aside oil the ground of an error  on  the face  of  the  award  even if the  answer  to  the  question involves  an erroneous decision on a point of law.   In  the present  case  there  was  a general  reference  and  not  a specific reference on any question of law. Champsey  Bhara and Co. v. Jivraj Balloo Spinning &  Weaving Co.,  Ltd.,  L.  R.  50  1. A.  324,  In  the  matter  of  a arbitration between King and Duveen  L.R. 1913 2 K.B.1). 32, and  Government of Kelantan  v. Duff Development Co.,  Ltd., L. R. 1923 A. C. 395, relied on. The  contract  provided  for payment  of  charges  at  rates specified  therein and the arbitrators could not ignore  the express covenants between the parties and award amounts  not agreed to be                          795 paid.   A  contract  is not frustrated  merely  because  the circumstances in which it was made are altered.  The  courts have   no  general  power  to  absolve  a  party  from   the performance of his  part of the contract merely because  its performance  has become onerous on account of  an  unforseen turn  of events. Constantine’s case (1942) A. C. 154, Hirji Mulji v.  Cinemas Ltd.  Steamship  Co.,  Ltd.,  (1926)  A.  C.  497,   British Movietonews Ltd. v. London and District Cinemas, L. R.  1952 A.  C.  166  and Parki son &Co., Ltd.  v.  Commissioners  of Works. (1949) 2 K. B. D. 632, referred to. British Movietonews Ltd. v. London and District Cinemas Ltd. (1951) 1 K.B.D. 190, disapproved.  The  award which  ignored the express terms of the contract  prescribing           the remuneration  payable could not be justified  as  proceeding upon  the  basis  of  quantum          meruit.  Compensation quantum  meruit  may be awarded for work  done  or  services rendered  only  when  the price thereof is not  fixed  by  a contract. For work done or service rendered pursuant to  the terms  of a contract, compensation quantum meruit cannot  be awarded where  the  contract provides for the  consideration payable in that behalf.

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JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal   No.   693    of 1957. Appeal from the judgment and Order dated the 25th May,  1956 of the Punjab High Court in F.A.C. No. 89/D of 55. N. C. Chatterjee, S. K. Kapur, N. H. Hingorani    and Ganpat Rai, for the appellants. H. J. Umrigar and T. M. Sen, for the respondent. 1960. January 20. The Judgment of the Court was   delivered by SHAH  J.-On May 3, 1937, M/s. Alopi Parshad and  Sons  Ltd., who will herinafter be referred to as the    Agents,   were, under an agreement in writing, appointed     by          the Governor-General for India in Council, as    from October 1, 1937, agents for purchasing ghee   required  for the use  of the Army personnel. The  Government  of India, by cl. 12  of the agreement, undertook  to  pay to the Agents  the  actual expenses  incurred for purchasing ghee, cost of empty  tins, expenses incurred on clearance of Government tins from   the railway, export land-customs duty levied     on         ghee purchased and exported from markets situated in       Indian States,  octroi duty, terminal tax or other local  rates  on ghee, and certain other charges incurred 796 by  the  Agents.  The Government also agreed to pay  to  the Agents at rates specified in the agreement: (1)  the financing and overhead (mandi) charges incurred  in the buying markets. (2) the cost of establishments and contingencies    provided by  the Agents on the Government’s account for carrying  out the purchase and supply of ghee, and (3)  the  buying  remuneration. In  consideration of the  Government paying to the Agents  a sum  of rupee one and anna one only per one  hundred  pounds nett weight of finally accepted ghee, as combined  financing and overhead (mandi) charges, the Agents by cl. 13 undertook to  provide the working capital and also to bear the  costs, charges  and  expenses,  including  financing  and  overhead charges incurred by them in buying ghee in the market. The   Agents  also  undertook,  by  cl.  14,  to  bear   the establishment   and   contingency  charges   for   the   duo performance  by them of the terms of the agreement, and  the Government  agreed to pay in consideration thereof annas  14 and  pies 6 per every hundred pounds of ghee accepted.   The Government also agreed to pay to the Agents remuneration for services  rendered  in purchasing ghee, at the rate  of  one rupee per one hundred pounds nett weight of accepted ghee. Pursuant to the agreement, the Agents supplied from time  to time  ghee  to  the Government of India,  as  required.   In September,  1939, the World War 11 broke out, and there  was an  enormous  increase in the demand by  the  Government  of ghee.   On  June 20, 1942, the original  agreement  was,  by mutual consent, revised, and in respect of the establishment and  contingencies, the uniform rate of annas 14 and 6  pies per  hundred pounds of accepted ghee, was substituted  by  a graded scale: for the first 5 thousand tons, the Agents were to be paid at the rate of Re. 0-14-6 per hundred pounds, for the  next  five thousand tons, at the rate of  annas  8  per hundred  pounds,  and  at the rate of annas  4  per  hundred pounds, for supplies exceeding ten thousand tons.  Even  ill respect of                       797

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remuneration  for services, a graded scale was  substituted: for  the first five thousand tons, remuneration    was to be paid  at the rate of Re. 1 per hundred  pounds, at  the rate of  annas 8 per hundred pounds, for the next five  thousand, and annas 4 per hundred  pounds, for supplies  exceeding ten thousand  tons.    This  modification  in  the  rates became effective from September 11, 1940. By  their communication dated December 6, 1943,  the  Agents demanded   that   the   remuneration,   establishment    and contingencies, and mandi and financing charges, be enhanced. In  respect of the buying remuneration, they proposed  a  25 per   cent  increase;  in  respect  of   establishment   and contingencies,  they proposed an increase of 20  per  cent., and  in respect of mandi and financing charges, an  increase of 112 per cent.  This revision of the rates was claimed  on the plea that the existing rates, fixed in peace time,  were "entirely  superseded  by  the  totally  altered  conditions obtaining  in war time." To this letter, no immediate  reply was  given  by  the  Government of  India,  and  the  Agents continued  to supply ghee till May, 1945.  On May 17,  1945, the Government of India, purporting to exercise their option under  cl.  9  of the agreement, served the  Agents  with  a notice  of termination of the agreement.  On May  22,  1945, the Chief Director of Purchases, on behalf of the Government of India, replied to the letter dated December 6, 1943,  and informed  the Agents that normally no claim for revision  of rates  could  be  entertained during  the  currency  of  the agreement  and especially with retrospective effect,  but  a claim  for  ex-gratia compensation to meet any  actual  loss suffered  by an agent, might be entertained, if  the  Agents established  circumstances  justifying such  a  claim.   The Chief Director of Purchases called upon the Agents to submit the  report -of their auditors on the agency  accounts,  for the  ghee supplied, as also a statement in  detail,  showing the actual expenditure incurred. The notice dated May 17, 1945, was waived by mutual consent, and  under  an arrangement dated May 16,  1946,  the  Agents agreed to supply five 798 thousand  tons of ghee by October 31, 1946, on  which  date, the  agreement dated May 3, 1937, was to come to an end. By   their   letter   dated  July  1,   1946,   the   Agents claimed  that a dispute had arisen under the  contract,  and appointed one Nigam to be arbitrator on their     behalf  to adjudicate upon the dispute, pursuant to cl. 20 of the terms of  the  agreement dated May 3, 1937, and. called  upon  the Government  of  India  to  appoint  their  arbitrator.   The Government  of India, by their letter dated July  10,  1946, nominated  one Rangi Lal to be arbitrator on  their  behalf. Before  the arbitrators, the Agents made their  claim  under four heads: (1)  The  Agents claimed that the agreement dated  June  20, 1942,  was not binding upon them, and they were entitled  to Rs.  23,08,372-8-0 being the difference between  the  buying remuneration,  establishment  and  contingency  charges  due under  the  agreement  dated May 3,  1937,  and  the  amount actually  received.  The details of this claim were set  out in Sch.  A. (2)In  the  event of the arbitrators holding  the  agreement dated  June 20, 1942, was binding, a revision of  the  rates for  establishment  and  contingencies,  and  an  additional amount of Rs. 6,91,600-4-0 at such revised rates as set  out in Sch.  B. (3)Revision  of  the rates fixed under the  agreement  dated June  20,  1942,  of the mandi charges,  and  an  additional

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amount of Rs. 14,47,204-6-3, at the revised rates as set out in Sch.  C. (4)Damages for wrongful termination of the agreement in  the month  of October, 1946, amounting to Rs. 2,41,235,  as  set out in Sch.  D. The  arbitrators did not arrive at any agreed decision,  and the dispute was referred to Lala Achru Ram who was nominated an  umpire.  The umpire was of the view that  the  agreement dated June 20, 1942, was valid, and the claim as set out  in Sch.   A was untenable; that the claims set out in  Sch.   B and Sch.  C, did not arise out of the agreement, and he  had no jurisdiction to adjudicate upon the same; and that as the claim set out in Sch.  D, was outside the scope of                             799 the  Reference,  he was incompetent to give any  finding  on that claim. This Award was filed in the court of the Sub-ordinate Judge, First  class,  Delhi.  The Agents applied to set  aside  the Award  on  the  grounds  that  the  umpire  was  guilty   of misconduct in that he failed to give an adequate opportunity to the Agents to present and substantiate their case  before him,  and  that in holding that the claims as  described  in Schedules  B,  C  and D, either did not  arise  out  of  the agreement  or were outside the scope of the  Reference,  the umpire  erred.  The learned Subordinate Judge held that  the umpire was in error in leaving undetermined claims described in  Sch.  B and Sch.  D, which were within the scope of  the Reference,  and  that  the claim described in  Sch.   C  was properly  left undecided as it was outside the scope of  the Reference.   He  also held that the Award  was  vitiated  on account of judicial misconduct, because the Agents were  not allowed by the umpire sufficient opportunity to place  their case.    The  learned  Subordinate  Judge,  in  that   view, proceeded  to  set  aside  the Award,  but  he  declined  to supersede  the  Reference,  and left it to  the  parties  to "appoint  other  arbitrators  in  view  of  cl.  20  of  the agreement, for settling the dispute." Against  the  order of the Subordinate Judge, the  Union  of India  appealed to the High Court of East  Punjab.   Khosla, J., who heard the appeal, confirmed the order passed by  the court of first instance.  The learned Judge agreed with  the view  of  the  Subordinate Judge that the  umpire  bad  been guilty  of judicial misconduct.  The learned Judge  observed in  his judgment that the claim of the Agents, as  described in  Schedules  B  and  C, was  not  beyond  the  arbitration agreement.   In so observing, presumably, the learned  Judge committed some error.  The Subordinate Judge had come to the conclusion  that the claim described in Sch.  C, was  beyond the  arbitration  agreement, and no reasons  were  given  by Khosla, J., for disagreeing with that view. Appeal  31  of 1953 under the Letters  Patent,  against  the judgment of Khosla J., was dismissed by a 102 800 Division  Bench of the High Court of East Punjab,  observing that  the  claim  detailed  in Sch.   B  arose  out  of  the contract, but that it was unnecessary to decide whether  the claim described in Sch.  C for an increase in the  financing and  overhead mandi charges, was properly ruled out  by  the umpire. In the meantime, by letter dated August 9, 1952, the  Agents called  upon  the  Government  of  India  to  appoint  their arbitrator under cl. 20 of the agreement dated May 3,  1937, for a fresh adjudication of the dispute, and intimated  that they had again appointed Nigam to be their arbitrator.   The

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Government  of  India informed the Agents  by  their  letter dated August 14, 1952, that they had filed an appeal against the  judgment  of the Subordinate Judge, Delhi, and  in  the circumstances, the question of appointing an arbitrator, did not  arise  until  the final disposal of  the  appeal.   The Government,  however,  without prejudice  to  their  rights, including the right to prosecute the appeal, again appointed Rangi Lal to be arbitrator on their behalf. After  the Appeal under the Letters Patent, was  decided  by the  East  Punjab  High  Court on  Decemher  16,  1953,  the arbitrators  entered upon the reference.  On March 1,  1954, the  Agents  submitted  their  claim,  contending  that  the supplementary  agreement dated June 20, 1942, was  void  and not  binding  upon  them, and that, in  any  event,  on  the representations made on -December 6, 1943, and from time  to time thereafter, they were assured by the Chief Director  of Purchases  that the claim made by them would  be  favourably considered by the Government of India, and relying on  these assurances,  they  continued to supply  ghee  in  quantities demanded  by  the Government after incurring "  heavy  extra expenditure".   They also claimed that they were  constantly demanding  an increase in the mandi and  financing  charges, but the Chief Director of Purchases, who was duly authorized in  that  behalf  by the Government,  gave  repeated  verbal assurances  that  their  demands  would  be  satisfied,  and requested  them  to  continue supplies  for  the  successful prosecution of the war.  Contending                                    801        that  the Government of India was estopped from  repudiating        their claim set out in Schedules B and C, in view of all the        facts and circumstances stated in  the petition,  the Agents        prayed  for a declaration that the  supplementary  agreement        dated June 20, 1942, was void and not binding upon them, and        for  a decree for payment of Rs. 27,48,515 with interest  at        the  rate of 6 per cent. per annum from March 1, 1954,  and,        in  the,  alternative, for a decree for  Rs.  25,63,037-7-3,        with  interest  at the rate of 6 percent.  per  annual  from        March 1, 1954, till recovery.  This claim of the Agents  was        resisted  by  the Government of India.  Inter alia,  it  was        denied  that  any assurances were given by the  Director  of        Purchases,  or  that  the Agents continued  to  supply  thee        relying upon such alleged assurances.  It was asserted  that        the  Agents continued to supply thee without insisting  upon        any  modification of the agreement, because they found,  and        it must be presumed that they found, it profitable to do  so        under the terms fixed under the supplementary contract dated        June  20, 1942.  The claims made for the  additional  buying        remuneration,  for mandi charges and for  establishment  and        contingency charges, were denied.  It was urged that, in any        event, the claim for additional buying remuneration and  for        mandi  charges  and for reimbursement of  establishment  and        contingencies,  was not covered by cl. 20 of the  agreement,        under which the submission to arbitration was made, and  the        arbitrators  had  no jurisdiction to adjudicate  upon  those        claims.        On the claim made by the Agents, and the denial thereof, the        arbitrators  incorporated the points of contest in the  form        of certain issues.  On May 2, 1954, the arbitrators made  an        award  rejecting  the  primary claim on the  view  that  the        supplementary  agreement  dated  June  20,  1942,  was   for        consideration  and the same was valid and binding  upon  the        Agents.   On the alternative claim, they awarded, under  the        head  of establishment and contingencies,  Rs.  80,994-12-6,        being  the actual loss which, in their view, the Agents  had        suffered, and Rs. 11,27,965-11-3, in addition to the amounts

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      received by the Agents from the Government        802        for   mandi   and  financing   charges.    The   arbitrators        accordingly  awarded  an amount of Rs.  13,03,676-12-6  with        future interest from November 15, 1949, till the V. date  of        realization, and costs.        The Union of India  The award was filed in the court of  the        Commercial  Subordinate Judge, Delhi, on June 2, 1954.   The        Government  of  India  applied under ss. 30 and  33  of  the        Indian  Arbitration  Act,  to set aside  the  award  on  the        grounds  that  it was invalid, that it had  been  improperly        procured,  and that it was vitiated on account  of  judicial        misconduct  of the arbitrators.  The Commercial  Subordinate        Judge  held  that  the arbitrators had  committed  an  error        apparent  on the face of the award in ordering the Union  to        pay to the Agents additional remuneration and financing  and        overhead  charges,  but,  in his  view,  specific  questions        having  been  expressly  referred for  adjudication  to  the        arbitrators,  the  award was binding upon  the  parties  and        could not be set aside on the ground of an error apparent on        the face thereof.  The learned Judge, accordingly,  rejected        the application for setting aside the award.        Against  the order made by the Subordinate Judge, an  appeal        was  preferred  by the Union of India to the High  Court  of        East  Punjab at Chandigarh.  At the hearing of  the  appeal,        counsel  for the Agents sought to support the award  on  the        plea  that certain questions had been specifically  referred        to  the arbitrators, and it was open to the  arbitrators  to        make  the  award which they made, on the  basis  of  quantum        meruit.   The  High Court held that there  was  no  specific        reference  of any questions of law to the  arbitrators,  and        the  decision of the arbitrators was not conclusive and  was        open  to  challenge,  because  it  was  vitiated  by  errors        apparent on the face of the award.  The High Court  reversed        the order passed by the Subordinate Judge, and set aside the        award  of the arbitrators, holding that there was no  "legal        basis  for awarding any compensation" to the Agents for  any        loss which they might have sustained.  This appeal has  been        filed  with leave of the High Court under el. 133 (1)(a)  of        the Constitution.        803        The extent of the jurisdiction of the court to set aside  an        award  on the ground of an error in making,,,,,,. the  award        is  well-defined.   The award of an arbitrator   may  be set        aside  on  the ground of an error on the face  thereof  only        when  in the award or in any document incorporated with  it,        as for instance, a note appended by the arbitrators, stating        the  reasons  for his decision, there is  found  some  legal        proposition  which  is the basis of the award and  which  is        erroneous-Champsey  Bhara  and  Company  v.  Jivaraj  Balloo        Spinning  and Weaving Company, Limited (1).  If, however,  a        specific  question  is submitted to the  arbitrator  and  he        answers  it, the fact that the answer involves an  erroneous        decision in point of law does not make the award bad on  its        face so as to permit of its being set aside-In the matter of        an  arbitration between King and Duveen and Others (2 )  and        Government  of Kelantan v. Duff Development Company  Limited        (3).        Was  the reference made by the parties to the arbitrators  a        specific  reference,  that  is,  a  reference  inviting  the        arbitrators to decide certain. questions of law submitted to        them?   If the reference is of a specific question  of  law,        even  if  the  award is erroneous,  the  decision  being  of        arbitrators selected by the parties to adjudicate upon those        questions,  the  award  will  bind  the  parties.   In   the

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      reference  originally made to the arbitrators by the  letter        of  the  Agents  on  July 1, 1946,  and  the  reply  of  the        Government  dated July 10, 1946, a general reference of  the        dispute was made in terms of el. 20 of the agreement.   Even        though  the award made on that reference, was set  aside  by        the  Subordinate Judge, the arbitration was not  superseded,        and  the  reference was expressly kept alive,  reserving  an        opportunity  to  the parties to  appoint  fresh  arbitrators        pursuant to the agreement, for settling the dispute; and  by        letters  respectively dated August 2, 1952, and  August  14,        1952, a general reference was again made to the arbitrators.        Paragraph  14 of the letter written by the Agents on  August        2,  1952, evidences an intention to serve the  notice  under        cl. 20        (1) L.R. 5o I.A. 324.     (2) L.E. (1913) 2 K.B.D. 32.        (3)  L.R. 1923 A.C..395.        804        of  the  agreement.  Issues were undoubtedly raised  by  the        arbitrators, but that was presumably to focus  the attention        of the parties on the points arising for adjudication.   The        Agents had made their claim before the arbitrators, and  the        claim and the jurisdiction of the arbitrators to  adjudicate        upon  the claim, were denied.  The arbitrators were  by  the        terms  of reference only authorized to adjudicate  upon  the        disputes raised.  There is no foundation for the view that a        specific  reference,  submitting a question of law  for  the        adjudication of the arbitrators, was made.        We  agree, therefore, with the view of the High  Court  that        the  reference  made,  was a general  reference  and  not  a        specific  reference on any question of law.  The award  may,        therefore,  be  set  aside  if  it  be  demonstrated  to  be        erroneous on the face of it.        The original agreement dated May 3,1937, was modified by the        supplementary  agreement  dated  June  20,  1942,  and   the        arbitrators  have  held  that  the  modified  agreement  was        binding  upon the Agents.  By the agreement as  modified,  a        graded  scale  was  fixed  for  the  establishment  and  the        contingencies  to  be paid to the Agents, and also  for  the        mandi charges and overhead expenses.  The arbitrators  still        proceeded  to award an additional amount  for  establishment        and  contingencies  and  an  additional  amount  for   mandi        charges.   By  el.  14(a), read with el. 12(b)  (2)  of  the        agreement,  the rate at which establishment and  contingency        charges were to be paid, was expressly stipulated, and there        is no dispute that the Government of India have paid to  the        Agents  those  charges  at  the  stipulated  rate  for  thee        actually purchased.  The award of the arbitrators shows that        the  amount actually received from the Government,  totalled        Rs.   6,04,700-9-0,  whereas,  according  to  the   accounts        maintained  by the Agents, they had spent Rs.  6,77,542-0-3.        Granting  that  the  Agents  had  incurred  this  additional        expenditure    under   the   head   ‘   establishment    and        contingencies’,  when the contract expressly stipulated  for        payment  of charges at rates specified therein, we  fail  to        appreciate  on what ground the arbitrators could ignore  the        express        805        covenants  between  the  parties, and award  to  the  Agents        amounts  which the Union of India had  not agreed to pay  to        the  Agents.   The  award  of  the     arbitrators, awarding        additional  expenses  under the head  of  establishment  and        contingencies,  together  with interest thereon, is  on  the        face of it erroneous.        Before  the arbitrators, a number of arhatias  who  supplied        thee  to  the Agents, appeared and  produced  extracts  from

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      their  books, showing the amounts actually due to them  from        the  latter.  Detailed charts, showing the total amount  due        under  each  head  of  expenditure  to  each  arhatia,  were        produced.    The   arbitrators  were  satisfied   that   the        statements produced, reflected a general rise in prices  and        cost of labour.  Taking into consideration the fact that the        other  persons  were buying thee at  rates  considerably  in        excess  of the stipulated rates, the arbitrators  held  that        the  Agents were entitled to be reimbursed to the extent  of        Rs.   11,27,965-11-3.   But  the  terms  of  the   contract,        stipulating  the  rate at which the financing  and  overhead        charges were to be paid under el. 13(a) read with cl. 12(b),        remained  binding so long as the contract was not  abandoned        or  altered by mutual agreement, and the arbitrators had  no        authority  to  award  any amount in  excess  of  the  amount        expressly stipulated to be paid.  Mr. Chatterjee, on  behalf        of the Agents, submitted that the circumstances existing  at        the  time when the terms of the contract were settled,  were        "entirely  displaced"  by  reason  of  the  commencement  of        hostilities  in the Second World War, and the terms  of  the        contract agreed upon in the light of circumstances  existing        in May, 1937, could not, in view of the turn of events which        were  never  in  the contemplation of  the  parties,  remain        binding  upon the Agents.  This argument is untrue  in  fact        and unsupportable in law.  The contract was modified on June        20,  1942, by mutual consent, and the modification was  made        nearly   three   years  after  the   commencement   of   the        hostilities.   The  Agents were fully aware of  the  altered        circumstances  at  the date when the modified  schedule  for        payment  of  overhead  charges,  contingencies  and   buying        remuneration, was agreed        806        upon.   Again, a contract is not frustrated  merely  because        the  circumstances  in  which the  contract  was  made,  are        altered.        Section 56 of the Indian Contract Act provides        " A contract to do an act which, after the contract is made,        becomes  impossible, or, by reason of some event  which  the        promiser could not prevent, unlawful, becomes void when  the        act becomes impossible or unlawful."        Performance  of  the contract had not become  impossible  or        unlawful; the contract was in fact performed by the  Agents,        and they have received remuneration expressly stipulated  to        be paid therein.  The Indian Contract Act does not enable  a        party to a contract to ignore the express covenants thereof,        and to claim payment of consideration for performance of the        contract  at rates different from the stipulated  rates,  on        some  vague plea of equity.  " The parties to  an  executory        contract are often faced, in the course of carrying it  out,        with   a  turn  of  events  which  they  did  not   at   all        anticipate--a  wholly  abnormal rise or fall  in  prices,  a        sudden  depreciation of currency, an unexpected obstacle  to        execution, or the like.  Yet this does not in itself  affect        the  bargain  they  have made.  If, on  the  other  hand,  a        consideration of the terms of the contract, in the light  of        the circumstances existing when it was made, shows that they        never agreed to be bound in a fundamentally different situa-        tion which has now unexpectedly emerged, the contract ceases        to  bind  at  that  point-not  because  the  court  in   its        discretion  thinks  it just and reasonable  to  qualify  the        terms of the contract, but because on its true  construction        it  does not apply in that situation.  When it is said  that        in  such circumstances the court reaches a conclusion  which        is  ’just  and  reasonable’ (Lord  Wright  in  Constantine’s        case(1) or one ’which justice demands’ (Lord Sumner in Hirji

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      Mulji  v. Cheong Yue Steamship Co. Ltd. (2) this  result  is        arrived at by putting a just construction upon the  contract        in accordance with an ’implication............ from the        (1) (1942) A.C. 154, 186.      (2) (1926) A.C. 497, 510        807        presumed  common  intention of the parties’-speech  of  Lord        Simon  in  British Movietonews Ltd. v. London  and  District        Cinemas Ltd. (1).        There  is  no  general liberty reserved  to  the  courts  to        absolve  a party from liability to perform his part   of the        contract,  merely  because on account of  an  uncontemplated        turn  of events, the performance of the contract may  become        onerous.  That is the law both in India and in England,  and        there is, in our opinion, no general rule to which  recourse        may  be  had as contended by Mr.  Chatterjee,  relying  upon        which a party may ignore the express covenants on account of        an  uncontemplated  turn  of events since the  date  of  the        contract.   Mr.  Chatterjee strenuously  contended  that  in        England,  a rule has in recent years been evolved which  did        not attach to contracts the same sanctity which the  earlier        decisions had attached, and in support of his contention, he        relied upon the observations made in British Movietonews Ld.        v.  London  and  District Cinemas Ld. (2).   In  that  case,        Denning, L.J., is reported to have observed :         "............ no matter that a contract is framed in  words        which   taken  literally  or  absolutely,  cover  what   has        happened, nevertheless, if the ensuing turn of events was so        completely outside the contemplation of the parties that the        court  is satisfied that the parties, as reasonable  people,        cannot  have intended that the contract should apply to  the        new  situation,  then the court will read the words  of  the        contract in a qualified sense; it will restrict them to  the        circumstances contemplated by the parties; it will not apply        them  to  the  uncontemplated turn of events,  but  will  do        therein what is just and reasonable.  "        But  the  observations  made by Denning,  L.J.,  upon  which        reliance  has  been  placed,  proceeded  substantially  upon        misapprehension  of what was decided in Parkinson & Co.  Ld.        v.  Commissioners  of Works (3), on which the  learned  Lord        Justice  placed  considerable reliance.  The view  taken  by        him, was negatived  in        (1) L.R. 1052 A.C. 166 at pp. 185 & 186.        (2) (1951) 1 K.B.D. 19O, 201,        (3) (1949) 2 K.B. D. 632.        103        808        appeal  to  the House of Lords in the  British  Movietonew’s        case-(1952) A.C. 166-already referred to.  In lndia, in  the        codified law of contracts, there is nothing which  justifies        the  view  that  a change of  circustamences,  "  completely        outside  the contemplation of parties" at the time when  the        contract  was  entered  into, will justify  a  court,  while        holding the parties bound by the contract, in departing from        the  express  terms  thereof.   Parkinson  and  Co.  Ld.  v.        Commissioners  of Works (1) was a case in which on the  true        interpretation of a contract, it was held, though it was not        so  expressly  provided,  that  the  profits  of  a  private        contractor,  who  had  entered  into  a  contract  with  the        Commissioners   of   Works   to   make   certain    building        constructions and such other additional constructions as may        be demanded by the latter, were restricted to a fixed amount        only   if   the  additional  quantity  of   work   did   not        substantially exceed in value a specified sum.  The Court in        that  case held that a term must be implied in the  contract        that  the  Commissioners should not be entitled  to  require

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      work  materially  in excess of the specified sum.   In  that        case,  the  Court  did not proceed  upon  any  such  general        principle  as was assumed by Denning, L.J., in  the  British        Movietonews Ld. v. London and District Cinemas Ld. (2).        We  are, therefore, unable to agree with the  contention  of        Mr.  Chatterjee  that  the arbitrators,  were  justified  in        ignoring  the  express  terms of  the  contract  prescribing        remuneration  payable to the Agents, and in proceeding  upon        the basis of quantum meruit.        Relying  upon  s. 222 of the Indian Contract Act,  by  which        duty to indemnify the agent against the consequences of  all        lawful acts done in exercise of the authority conferred,  is        imposed  upon the employer, the arbitrators could not  award        compensation  to  the  agents in  excess  of  the  expressly        stipulated consideration.  The claim made by the Agents  was        not for indemnity for consequences of acts lawfully done  by        them  on behalf of the Government of India; it was  a  claim        for charges incurred by them in excess of those  stipulated.        Such a claim was not a claim for        (1) (1949) 2 K.P.D. 632.        (2) (1951) 1 K.B.D. 190, 201.        809        indemnity,  but a claim for enhancement of the rate  of  the        agreed consideration.  Assuming that the Agents relied  upon        assurances alleged to be given by the Director in-charge  of        Purchases,  in the absence of an express covenant  modifying        the  contract  which  governed the relations  of  the Agents        with  the  Government of India, vague assurances  could  not        modify  the  contract.   Ghee having been  supplied  by  the        Agents  under the terms of the -contract, the right  of  the        Agents  was to receive remuneration under the terms of  that        contract.   It  is  difficult  to  appreciate  the  argument        advanced by Mr. Chatterjee that the Agents were entitled  to        claim remuneration at rates substantially different from the        terms   stipulated,   on  the  basis  of   quantum   meruit.        Compensation  quantum  meruit is awarded for  work  done  or        services rendered, when the price thereof is not fixed by  a        contract.   For work done or services rendered  pursuant  to        the terms of a contract, compensation quantum meruit  cannot        be awarded where the contract provides for the consideration        payable  in  that behalf Quantum meruit  is  but  reasonable        compensation  awarded  on  implication  of  a  contract   to        remunerate,   and  an  express  stipulation  governing   the        relations  between the parties under a contract,  cannot  be        displaced   by   assuming  that  the  stipulation   is   not        reasonable.   It is, therefore, unnecessary to consider  the        argument  advanced  by  Mr.  Chatterjee  that  a  claim  for        compensation  on the basis of quantum meruit, is  one  which        arises  out of the agreement within the meaning of  cl.  20.        Granting  that  a  claim for compensation on  the  basis  of        quantum  meruit, may be adjudicated upon by the  arbitrators        in  a reference made under el. 20 of the agreement,  in  the        circumstances  of the case before us, compensation  on  that        basis could not be claimed.        The  plea that there was a bar of res judicata by reason  of        the  decision in the Letters Patent Appeal No. 31  of  1953,        has,  in our judgment, no force.  The Subordinate Judge  set        aside  the award on the ground that there had been  judicial        misconduct committed by the umpire and also on the view that        the claims made, as described in Schedules B and D, were not        outside        810        the competence of the arbitrators.  The High Court in appeal        under  the  Letters Patent, did confirm the  order,  setting        aside the award; but there was no  binding decision  between

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      the parties that the claim   described in Sch.  B, that  is,        the  claim  for establishment and contingency  charges,  was        within   the          competence  of  the   arbitrators   in        reference under el. 20.It may be observed that according  to        the High Court of East Punjab in the Appeal No. 31 of  1953,        under  the Letters Patent, it was not necessary  to  express        any  opinion  whether the claim in Sch.  C  was  within  the        competence  of the arbitrators, and the claims described  in        Sch.  D does not appear to have been agitated in the  second        arbitration proceeding.        We, accordingly, agree with the view of the High Court  that        the  Award  of the arbitrators was liable to  be  set  aside        because  of an error apparent on the face of the award.   In        this view, the appeal fails and is dismissed with costs.        Appeal dismissed.